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on Banking |
| By: | Carlos Pérez Montes (Banco de España) |
| Abstract: | This article estimates a general credit risk model with both macroeconomic and latent credit factors for Spanish banks during the period 2004-2010. The proposed framework allows to estimate with bank level data both the standard credit risk model of Basel II and generalized models. I fi nd evidence of persistence in the credit latent factor and of a signifi cant effect of GDP growth and interbank rates on loan default rates. The estimated default correlation is low across specifications. The model is also used to calculate the impact on the probabilities of default of stressed economic scenarios. |
| Keywords: | credit risk, default correlation, stress test, state space model, bootstrap, MLE |
| JEL: | E0 G21 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1305&r=ban |
| By: | Trapp, Monika; Wewel, Claudio |
| Abstract: | In this paper we study systemic risk for the US and Europe. We show that banks' exposures to common risk factors are crucial for systemic risk. We come to this conclusion by first showing that relations between US and European banks are smaller than within each region. We then show that European banks react more strongly to the onset of the financial crisis than US ones. Regarding the consequences of systemic risk, we show that dependence between the banking sector and a wide range of real sectors is limited. Our results imply that regulators and supervisors should address international bank dependencies arising from common risk factors, while recessions in real sectors due to bank defaults should be a secondary concern. -- |
| Keywords: | systemic risk,banking sector,real sectors,regulation,copula |
| JEL: | G01 G15 G18 G21 G28 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1210r&r=ban |
| By: | Tobias Körner; Isabel Schnabel |
| Abstract: | This paper shows that the abolition of state guarantees to publicly owned banks in Germany resulted in an increase in funding costs at German savings banks. Rather than being the result of increased market discipline, the increase in funding costs is shown to be driven by spillover effects from German Landesbanken who themselves had suffered from the abolition of guarantees and who spread their own cost increase through the public banking network. Higher funding costs and the resulting drop in bank charter values translated into higher risk-taking at German savings bank. |
| Keywords: | Public bail-out guarantees; savings banks; Landesbanken; market discipline; bank risk-taking; banking networks |
| JEL: | G21 G28 H11 L32 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0437&r=ban |
| By: | Buch, Claudia M.; Koetter, Michael; Ohls, Jana |
| Abstract: | In this paper, we use detailed data on the sovereign debt holdings of all German banks to analyse the determinants of sovereign debt exposures and the implications of sovereign exposures for bank risk. Our main findings are as follows. First, sovereign bond holdings are heterogeneous across banks. Larger, weakly capitalised banks and banks with a small depositor base hold more sovereign bonds. Around 31% of all German banks hold no sovereign bonds at all. Second, the sensitivity of banks to macroeconomic factors increased significantly in the post-Lehman period. Banks hold more bonds from euro area countries, from low-inflation countries, and from countries with high sovereign bond yields. Third, there has been no marked impact of sovereign bond holdings on bank risk. This result could indicate the widespread absence of marking-to-market for sovereign bond holdings at the onset of the sovereign debt crisis in Europe. -- |
| Keywords: | sovereign debt,bank-level heterogeneity,bank risk |
| JEL: | G11 G18 G21 G28 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:292013&r=ban |
| By: | Tobias Körner; Oliver Müller; Stephan Paus; Christoph M. Schmidt |
| Abstract: | Improving the regulation of banks has been at the centre of economic policy actions since the outbreak of the global financial crisis. One of the many and conceptually very different measures proposed is to improve the corporate governance of banks by setting qualification standards for banks’ non-executive directors. To explore the rationale of such a regulation implemented in Germany, we conducted a detailed survey among supervisory board members of German banks covering their educational background, professional status and experience, as well as non-occupation-related activities. We document that general education among supervisory board members is high, but very few board members can rely on a professional background in banking and finance. Surprisingly, we find that this is especially true for chairpersons and that a higher share of professionals among board members primarily reflects the presence of employee representatives. However, as regards competencies and skills required to enforce changes against the management, chairpersons more often report leadership experience than ordinary members. Furthermore, some of these findings strongly depend on the bank’s legal form, its size and business model, suggesting that both market forces and institutional characteristics of banking markets are important determinants of the qualification level of non-executive directors. |
| Keywords: | Non-executive directors; qualification; survey data; banking regulation; German banking system |
| JEL: | G21 G28 G34 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0436&r=ban |
| By: | Alesia Kalbaska |
| Abstract: | This paper analyzes the evolution of the banking system sensitivity to cross-border contagion over the period of 2006-2011. The study is performed on the basis of the BIS data on crossborder exposures and the Bankscope data on Tier 1 capital of 20 banking systems (Australia, Austria, Belgium, Canada, Finland, France, Germany, Greece, India, Ireland, Italy, Japan, the Netherlands, Portugal, Spain, Sweden, Switzerland, Turkey, the UK and the US). Since the European sovereign debt crisis took a decisive turn at the end of 2009, markets started looking at its main protagonists - so called PIIGS (Portugal, Ireland, Italy, Greece and Spain) - with a lot of anxiety. However, unexpectedly, the analysis of the data shows that a single failure among PIIGS could be absorbed by the network in 2011. Nevertheless, multiple initial failures (especially combinations including Italy and/or Spain) could be more dangerous. The simulation results reveal that the resilience of banking systems to contagion risks tends to improve over the years. The most systemically important countries are those of the US, the UK, France and Germany. Besides, a shock to the US is capable of destroying the UK banking system already in the ?rst round, whereas the UK would not lead to the failure of the US banking system even after all rounds of contagion. The results also show that the banking systems of the US, Turkey and Finland are completely immune to contagion effects. At the same time, there exist considerable risks for Switzerland and Ireland as their banking systems default also with high recovery rates. |
| Keywords: | contagion, Furfine algorithm, stress testing, PIIGS |
| JEL: | F34 F37 G01 G15 G21 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:680&r=ban |
| By: | Kashiwabara, Chie |
| Abstract: | In the post-Asian crisis period, bank loans to the manufacturing sector have shown a slow recovery in the affected countries, unexceptionally in the Philippines. This paper provides a literacy survey on the effectiveness of the Central Bank’s monetary policy and the responsiveness of the financial market, and discusses on the future works necessary to better understand the monetary policy effectiveness in the Philippines. As the survey shows, most previous works focus on the correlation between the short-term policy rates and during the period of monetary tightening and relatively less interest in quantitative effectiveness. Future tasks would shed lights on (1) the asset side – other than loan outstanding – of banks to analyze their behavior/preference in structuring portfolios, and (2) the quantitative impacts during the monetary easing period. |
| Keywords: | Philippines, Monetary policy, Loans, Credit, Monetary policy measure, Credit channel, Bank loan |
| JEL: | E42 E52 G38 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper413&r=ban |
| By: | Deniz Igan, Alain Kabundi, Francisco Nadal De Simone, Natalia Tamirisa |
| Abstract: | This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets of various economic agents act as important links in the monetary policy transmission mechanism. Balance sheets of financial intermediaries, such as commercial banks, asset-backed-security issuers and, to a lesser extent, security brokers and dealers, shrink in response to monetary tightening, while money market fund assets grow. The balance sheet effects are comparable in magnitude to the traditional interest rate channel. However, their economic significance in the run-up to the recent financial crisis was small. Large increases in interest rates would have been needed to avert a rapid rise of house prices and an unsustainable expansion of mortgage credit, suggesting an important role for macroprudential policies. |
| Keywords: | monetary policy transmission, balance sheets, FAVAR, generalized dynamic factor models |
| JEL: | E44 E52 G20 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:364&r=ban |